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Music Recording Contracts – Eight Rules by William Genereux

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I’m a lawyer who writes music recording contracts and litigates breaches of recording contracts in court. I have a perspective on things that are needed yet are often poorly addressed in these types of agreements. These things can be pivotal in negotiating a smart business relationship and winning disputes. There is no closed list. Here’s some of what I look for in music contracts and in the business relationships behind them.

Identify the Parties Being Bound. Believe it or not, this problem occurs regularly even with contracts prepared by experienced people. An artist often will supply services through his or her own loan-out company. Members of a group might not be signing with the label or the manager. Leaving-member riders might be needed, with or without clauses about outside projects. A label identified without its full corporate name, or maybe only by its logo, will attract liabilities to affiliates and distributors.

Get the Grant Right. The contract will either be a licence or an assignment of rights. This is probably the most important clause in the agreement. The licence could be non-exclusive which means that no sub-licences can be granted, or exclusive, which means the opposite. An assignment usually is irrevocable unless there is a reversion of rights at a later date. Moral rights will be waived in most circumstances, but a savvy artist will retain rights of consultation and approval. Things to look for are duration, types of uses allowed, geographic territory, and whether the licence is revocable if there is a breach of contract remaining after a cure period.

Check the Term. This means not only how long the contract period will be with all options for renewal exercised but also when it starts. There could be a delivery term, an exploitation term and a retention period.

Assess the Royalty Streams. There might be a recoupable advance, but what is recoupable and what is not is the key difference between the artist getting paid pretty quick versus being in a long-term commitment in which creativity is smothered by financial desperation. In-house expenses are never recoupable. Everything else is negotiable. Side issues include whether the rate for digital streams and downloads should be something like 50% of net proceeds or 20% of the published price to dealer (PPD) or less. Artists and labels have litigated under pre-digital agreements for the right to have digital sales paid as licences at 50% rather than as record sales at 20% of PPD or less but what can be negotiated today is a moving target, when labels have significant non-recoupable marketing expenses. All contracts should have a so-called “basket clause” so that any use not specifically described will be subject to a royalty; otherwise, there will be ambiguity about whether non-enumerated uses should attract royalties.

Determine the Limits of Exclusivity. From a label’s perspective, would you invest in an artist who might pack up and move on? Savvy artists can carve out a Plan B.

Lock Down the Publishing. Music publishing is best handled by large publishing companies rather than small-fry independents or, worse yet, small-fry labels or managers. Music publishing is lucrative and when done correctly can open many doors for artists and their labels.

Hunt Down Cross-Collateralized and 360-Deal Provisions. This is a ripe area for negotiation, called “hedging your bets” by labels and called “everyone putting their hands in your pockets” by artists. The middle ground is sharing the revenue streams by way of overrides, with the artist keeping control of touring and other non-recording activities.

Check the Value Proposition. A plentiful exchange of contractual considerations between the parties speaks of a healthy business relationship. The label should be smart, responsive, hard working, and well connected. The artist should understand personal branding and be able and willing to do social media – and should always be asking for more money and resources. One of the worst things an artist can do is not ask for more. No label should want to sign an artist who is not hungry for commercial success. That’s one of many reasons why it’s called the music business.